Stop me if you've heard this one before. It's the eleventh hour and the Obama administration is facing a crucial decision, one that could have a deep impact on the nation's economy and a united voice of experts is facing noisy opposition from special interests. It's game time and the administration is on the field, ready to make the big play... and they instead choose to punt.

The EPA derives its power to regulated fuel economy from the Clean Air Act of 1963 [PDF], a law which was most recently amended in 1990 by Congress. A key question in recent years is whether the EPA can dictate what fuels the market should sell or blend. The last two Presidents -- Barack Obama and George W. Bush -- argued the answer to that question is "yes". The most crucial effort to that objective was the Energy Independence and Security Act of 2007 (EISA), signed into law by President Bush.

Under the EISA, which has been actively backed by President Obama, each year gasoline sellers in the U.S. must blend in more and more ethanol to help the U.S. meet "targets".

President Bush and Obama have backed the federal government manipulating the economy to push corn ethanol at the pump. [Image Source: Nation Corn Growers Assoc.]

In other words, the body of current evidence clearly points to corn ethanol -- the most abundant form of ethanol in the U.S. -- being bad news for both the U.S. consumer and the environment.

Automakers also say that higher blends of ethanol will damage the engines of older vehicles, in turn creating both economic problems. The EPA dubiously says it knows the science better than the people who made the vehicles, arguing that the automakers are liars.

In the midst of all the issues, why is there still a modicum of support for government manipulation of the fuel market in corn ethanol's favor?

Big corn has long been one of the nation's most powerful special interest. Corn farmers have benefited from billions in yearly government subsidies, with a major chunk of it coming from ethanol grants and mandates. In total, corn farmers drew $73.8B USD from 1995-2009 from the U.S. federal and state governments.

Amidst a record drought, feed prices are soaring. Livestock farmers have resorted to feeding their cows candy to try to keep from going bankrupt or letting their herd die. Meanwhile, corn is being actively fermented (or wasted, according to critics) into ethanol, putting further pressure on prices. And the EPA's fine-backed blending demands are the key factor driving that trend.

Without intervention, record corn prices coupled with drought may push small farms out of business. [Image Source: US News]

The corn farmers argue that they can't release information showing what their yields are; information that could validate the desperate farmers claims. Instead, their argument boils down to "just trust us", as they fight a potential EPA waiver to help the struggling farmers.

The Michigan Farm Bureau comments "[We don't believe keeping the blending targets] would severely harm the economy of Michigan at this time. We do not have final harvest numbers, making it premature to determine what our total crop supply will be in 2012."

Likewise The National Corn Growers Associationwrites [PDF], "We believe the burden of proof for severe harm to the economy falls on the petitioner. We believe the petitioners have failed to establish this proof, since higher feed prices are only one piece of a complicated economic puzzle."

III. Blending Targets May Kill Small Farmers' Businesses

On the other side stands a united group of farmers, state, and federal politicians.

Corn prices are up 60 percent on the year, and food prices are expected to rise 3.5 percent or more this year -- and more next year -- largely due to ethanol pressure. Corn prices have jumped 400 percent since the federal government backed corn ethanol under the Bush administration.

Eight state governors and 200 members of Congress have written a letter (on behalf of the slightly ironically named National Pork Producers Council) to the EPA pleading with it to relax blending rules via a waiver, at least for the rest of the year. Delaware and Maryland's governors write that without a waiver the EPA would be creating "the loss of thousands jobs."

Big corn donates deeply to federal politiicans, who in turn reward it with billions in subsidies.
[Image Source: Agriculture.com]

It would be awfully hard for the Obama administration's EPA to deny the waiver in the midst of such overwhelming support. On the other hand, it would be equally hard to turn their back on big corn special interests. Those affiliated with the National Corn Growers Assoc. alone poured close to $500,000 USD to candidates on both sides of the aisle in 2012 [source] (the majority went to Republicans, likely due to their more critical stance on ethanol, which big corn hoped to soften).

IV. Silence From the EPA

The EPA released a brief comment remarking, "EPA is completing its review and analysis of the RFS waiver requests and the agency plans to reach a decision shortly."

But Tuesday's deadline for a decision came and went without any word about the status.

The EPA appears ready to punt on the waiver. [Image Source: How to Punt a Football]

Late last year Congress finalized the cut to corn ethanol's tax subsidy. But the influx of money from big corn has some on The Hill calling for a renewal of an effort to force corn ethanol on the consumer, regardless the cost to the economy and the environment.

Amidst that backdrop, the only noise coming from the EPA is the sound of crickets as the waiver requests are punted deeper downfield.

So you go from 23.5 with 0% ethanol to 20.5 with 10% ethanol in your Subaru?

That's interesting considering I've been running E85 in my Subaru for years and my average tank changed from ~23 MPG on CA E10 to ~18 MPG on E85.

You lost ~15% by adding 10% and I lost ~25% by adding 70%?

There's no question that gasoline MPG is better, but I think your values are a little off. They're certainly off from expectation given stored energy per unit volume.

I love ethanol as a fuel, but using it in cars meant for unleaded gasoline (low octane) wastes a lot of the potential benefit of ethanol. There's a lot of thermal efficiency gain to be had. I'm re-builing my engine to take advantage of it this winter. We'll see what my MPG ends up at. Right now MPG is worse, but power is 50 HP more than on pump gas. I think I can keep most of the power and bring the MPGs back if I choose a design that won't have to "flex" to the low octane of unleaded.

While I don't think using ethanol from crops is long term viable, I think it's a necessary stepping stone towards more direct forms of bio-solar ethanol. I also think mixing it into gas in low percentages is going to happen no matter what anyone wants, just because it's the most benign oxygenation additive.